This paper incorporates volatility forecasting via the exponentially weighted moving average model into traditional tolerance limits for pair-trading strategies, and illustrates how the proposed method helps uncover arbitrage opportunities via the daily…
Goldman reported 45 days in the calendar quarter where it suffered a trading loss
CCP's clearing members incurred 49 margin breaches as of end-September
Increased scrutiny of anti-money laundering and customer due-diligence procedures means banks must create more efficient and effective systems. A recent webinar conducted by Risk.net and IBM discussed how leading banks are utilising artificial…
Ties between alternative risk premia and fixed income closer than appreciated
A comprehensive evaluation of value-at-risk models and a comparison of their performance in emerging markets
This paper aims to evaluate the performance of different value-at-risk (VaR) calculation methods, allowing the authors to identify models that are valid for use in emerging markets.
Modular tech and micro-services – plus new risk and regulatory needs – are creating openings for insurgents and incumbents
There is no concord on how banks should police their model risk. But two Fed economists have an idea
This paper aims to reflect the current state of the discussion on the validation of market risk forecasts by means of backtesting.
This study reviews the various statistical methodologies that are in place to test multiple systematic trading strategies and implements these methodologies under simulation with known artificial trading rules in order to critically compare and evaluate…
Measure aims to provide better gauge of VAR violations
In this paper, the authors present a new backtest for the unconditional coverage property of expected shortfall.
This paper analyzes the impact of different estimation window strategies, including structural breaks and forecast combinations, on forecasting common risk measures such as VaR and ES.
In this paper, the authors adopt a new method of predicting VaR, to estimate balanced portfolios’ VaR.
A fast-moving, headstrong hedge fund – hit by rare losses after a black swan event touched on an overweight country exposure – ponders adding fresh quantitative expertise. Much to traders’ chagrin, the chief investment officer and chief operating officer…
The Swiss bank has crunched down its market RWAs to Sfr12.3 billion
In this paper, the authors examine the problem of validating and calibrating FHS VaR models, focussing in particular on the Hull and White (1998) approach with EWMA volatility estimates, given its extended use in the industry.
Metrics commonly used to build indexes bring zero alpha, says Research Affiliates
Albanese, Caenazzo and Syrkin show how full-revaluation VAR is more accurate and robust than sensitivity-based VAR measures
Swapping non-modellable risk factors for proxies may make it harder to pass P&L attribution test
This paper proposes a performance test based on empirical similarity that would account for margin shortfall, procyclicality and efficiency in a single score.
In richer test, ‘filtered’ VAR beats five other measures